Diogenes, Put Down That Lamp. We May Have Found An Honest Man – On Friday, the Kansas City Fed’s Hoenig gave a speech in Omaha, Nebraska. In the speech (which was mostly about the "too big to fail" debate), President Hoenig appeared to join into a perception that permeates the trading floors. That thesis is that, despite the presumed best of intentions, government rescue efforts have been far too “ad hoc” and neither comprehensive nor cohesive. That is the perception that relates to the actions of both the prior and current Administration.
After outlining the series of actions both by the Fed and the government, Hoenig simply said:
The sequence of these actions, unfortunately, has added to market uncertainty.
The folks over at Bespoke Investment Group have noted the sharp drop since Inauguration. They relate it to a couple of initiatives. Here's what they wrote last Thursday:
While there are plenty of factors at work behind the current decline, it is hard to chalk it up as mere coincidence that the most recent leg down began on the day that Congress passed the $789 billion stimulus plan, and accelerated its downside last week with the release of the Administration’s budget. To put the declines in perspective, since the stimulus bill was passed on February 13th, the Russell 3000 has lost $1.7 trillion in market cap, which is over twice the value of the stimulus plan. The market is watching the actions coming out of Washington, and it clearly doesn’t like what it sees. Based on the Administration’s actions and comments towards the Health Care sector, student lenders, and other industries, investors are of the view that Washington is on a crusade to ensure that companies doing business with the Federal government are not entitled to profit from their services.
Net/net markets appear rattled by the fact that there is no "comprehensive plan", especially on the banking crisis. The patient is in cardiac arrest. We need "the paddles" not advice on how he should lose weight.
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